Why I decided to launch a search fund

In 2010 I was selling Manhattan real estate. The GFC was in full force, and the property market had taken a big hit.

I worked seven days a week to stay afloat. I was the first to arrive at the office and often the last to leave. Saturdays and Sundays were peak selling days, so a day off was a rare treat.

Rejection was a daily (hourly?) occurrence. No-shows were common. The subway was perpetually late.

I walked 5-10 miles a day. In dress shoes and a sweat-stained shirt. Or rain-drenched.

Glamorous this job was not. People’s disdain of real estate brokers is on par with that of attorneys and used car salesmen.

Yet at times, much to my surprise, I found myself thriving.

No, I didn’t have a passion for pre-war buildings. No, I wasn’t a native New Yorker. And no, I never had long-term visions of real estate moguldom.

However, looking back, I can see that I was captivated by the entrepreneurial nature of the job itself.

If the word entrepreneurial fails to fit into your idea of a property broker, let me explain:

• Selling real estate in Manhattan is a commission-only gig. You eat what you kill.

• A real estate salesperson is not an employee, but an independent contractor running her own business, technically.

• Rarely is a broker fed buyers or sellers. She has to hunt.

• In my time there were over 10,000 real estate salespeople in NYC. Without a brand identity and USP, you’re lost in the crowd.

• The budget belongs to the salesperson. If she wants a team, a marketing campaign, a pencil… the cost is her own. 

Despite the struggle, I loved the autonomy. I was my own boss, and for the most part I could run my business as I saw fit. I would succeed or fail on my own efforts. Zero security, but unlimited upside.

However, I decided in 2010 that I would not spend the rest of my career selling Manhattan real estate. I wanted to do something bigger and even more entrepreneurial, but that’s about as well as I could define my goals at the time.

I thought a global business school would be a good next step, so I started at INSEAD in 2011. I envisioned an international entrepreneurial journey post-MBA, with no plans to return to the US.

In addition to the core courses, I threw myself into the entrepreneurial electives. I took Realising Entrepreneurial Potential (REP), Your First Hundred Days (YFCD), and Identifying New Business Opportunities (INBO), to name a few. I also did the Silicon Valley trek, which showed me a side of my home state I hadn’t seen growing up. Each exposure left me more inspired to charge ahead.

The first time I heard about search funds was at an Entrepreneurship Club networking event. I got to chatting with the president of the club, who said I should consider buying a company. He must have mentioned the term search fund, but I had already discounted the idea. How could I buy a company when I had to repay my student loans?

Several weeks later I heard it again - this suggestion that I could buy a business. But this time it was a professor speaking about INSEAD’s entrepreneurial electives. And this time he made specific mention of the fact that I didn’t need any of my own money to pursue this path of entrepreneurship through acquisition (ETA).

The idea still seemed absurd to me, but I decided to dig further. 

At the time there were far fewer resources available for a prospective searcher like me than there are today, but I read what was available - the Stanford study and primer and a couple of news articles. I then conducted an independent study project during which I interviewed some 20-30 searchers, current and former. Nobody had launched a search fund out of INSEAD before, so I reached out cold to searchers in other networks and found them surprisingly receptive. I asked about motivations to search, investors, lessons learned, interns, and their hopes for the future.

These conversations raised some questions and concerns, but on the whole I developed a view of the search fund path as one that provided the thrill and reward of other forms of entrepreneurship, while mitigating many of the risks. I saw search funds as a good hybrid between typical startup entrepreneurship and the typical MBA corporate job.

I would still own the process, from raising capital to running the acquired business, but that business would already have demonstrated product-market fit, a team, and cash flows. And pre-acquisition, I could earn a modest salary. 

I knew that unicorn status would be an unlikely outcome of the search fund path, but I saw a lot of attractive possibilities between zero and unicorn, and I thought a search fund would offer me a good chance at grabbing one of those modest success stories, which I could then leverage for my next project. (I later became greedier, which complicated my search.)

I also frankly liked the idea of being the first out of INSEAD to do this. I knew it would be a challenge, and it was. I had a strange background, and the INSEAD brand had a tough time penetrating an American market saturated with other high-value b-school brands. (For many American investors, INSEAD can get lost in the soup of European acronym schools.) But I thought if I could manage to launch successfully, that would be a mini accomplishment in itself.

Finally, there just wasn’t really anything else that made sense for me. The job descriptions of most corporate opportunities bored me to death. I admit to being briefly caught in the swell of consulting fervor, throwing my CV into the ring at a couple of firms. Luckily, none of them wanted to talk to me, which enabled me to refocus on my entrepreneurial goals.

In 2012, I made the decision to launch a search fund, to the confusion of many of my classmates. I was scared, but excited for the journey ahead.

When I speak with prospective searchers today, some follow the same logic, and others have their own. Some see search funds as an efficient path to the CEO seat. Others see the IRR figures in the Stanford search fund study, and they want a piece. While it’s tempting to say there are no wrong answers here, some are more likely to spell success than others.

I think my reasons were pretty solid. I wanted a way to make my mark and chart my own path without assuming the extreme risk of a startup. And in what turned out to be an admittedly roundabout way in the end, that’s what I got.